A Denver development company, delinquent on $3.8 million of a city loan and owing $40,000 in back taxes, is poised to get a city contract worth $2.2 million.

The city’s proposed deal with Industrial Plus LLC calls for the company to rent warehouse space to the Denver Election Commission for eight years and two months. In return, the city would pay itself the monthly rent and credit it toward the outstanding loan.

The deal is the latest example of efforts by Mayor John Hickenlooper’s administration to deal with problems in the city’s loan program. In June, payments on more than $4.3 million in city housing and economic-development loans to private businesses were more than six months late. All of the loans, including the one to Industrial Plus, were made before Hickenlooper took office in 2003.

Bert Weston of the nonprofit Inner-City Community Development Corp. was identified as the principal of Industrial Plus during a City Council committee meeting Wednesday. She could not be reached Wednesday.

City officials admit the agreement is less than ideal but say the goal is to recoup as much of the loan as possible so taxpayers don’t get stuck with a default.

“This should come close to fixing the delinquency problem and get the city back its money,” said John Huggins, head of the city’s Office of Economic Development.

However, the City Council will not approve the contract until Industrial Plus pays off at least one debt.

“They need to pay their taxes, or no deal,” said Councilman Michael Hancock, head of the economic-development committee.

The proposed lease agreement goes before the entire City Council in two weeks. Industrial Plus must pay its taxes by then, Hancock said.

Huggins said the company ran into trouble when the rental market changed and it couldn’t collect projected rents. With the election commission rent, plus rent from existing tenants and tax-increment-financing payments of about $120,000 a year, Huggins said, the city should be “close to breaking even.”

He added that Industrial Plus intends to pay its taxes by the cutoff date.

The election commission must move out of its current storage space for voting machines because the area is being redeveloped.

The new warehouse at 3833 Steele St. will be improved with $610,000 from the city’s Economic Development Office for electrical upgrades, extra security features and office-space improvements.

Because of the unique nature of the contract, the city was able to negotiate an option to end the lease after four years, Huggins said.

City Councilwoman Jeanne Faatz said she is “extremely reluctant” to sign off on the contract but sees it as the only way for the city to get its money back.

“This is almost a no-win situation,” she said. “We’re stuck with yet another delinquent loan, but we need to attempt to get the taxpayers’ money.”

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